Synopses & Reviews
"Fridson uses common sense to poke at some of Wall Street's big selling myths. A handy guide for number crunchers." —Jack Willoughby Staff Writer Investment Dealers Digest
"Marty Fridson's book is a must for every serious financial analyst and an entertaining read for all others. He has taken a dry subject and given it aspects of a mystery novel through his abundant use of real examples which bring analytical issues to life." —Jack L. Rivkin Vice Chairman Director of Global Research Smith Barney
Just about anybody who's taken a good look at a quarterly or annual report has sensed that corporate financial statements are designed to conceal more than they actually reveal. But how exactly do corporations manipulate their public financial statements to make themselves appear as attractive as possible to investors—more attractive than they really may be? What important information are the accountants leaving out? And, more importantly, how can you make the numbers tell you what you really need to know? Now Financial Statement Analysis, Second Edition shows you how. Martin Fridson takes a hard look at the information that appears on financial statements, including the balance sheet, income statement, and statement of cash flows. With the help of many real-life illustrations, he explains the crucial information that corporations routinely leave out of their financial reports and the stratagems managers use to control the perceptions of investors and creditors.
Thoroughly updated and expanded to reflect today's financial realities, Financial Statement Analysis, Second Edition arms investors, money managers, financial analysts, and bankers with:
- Detailed guidelines on how to read and interpret balance sheets, income statements, and other key financial documents
- Dozens of timely true stories that demonstrate the kinds of complications that can arise when analysts apply textbook knowledge to real-world number juggling
- A gold mine of insider tips from a seasoned professional for maximizing the accuracy of forecasts
- The kind of healthy skepticism you need to reach sound conclusions through a structured approach to credit and equity evaluation
- New and expanded coverage of revenue recognition, country-to-country variations in accounting methods, new techniques for analyzing credit risk, the auditor's role, and more
Read Financial Statement Analysis, Second Edition and acquire all the insight and professional know-how you need to find the facts behind the fiction of most corporate financial statements.
"Martin Fridson provides a broad and very practical perspective on the art of financial statement analysis. By exploring numerous examples from recent real-world situations, the book enlivens and sharpens the issues involved in interpreting financial reports. It is a solid and interesting introduction to financial statements and their use in a variety of important analytical settings." —Jay O. Light Professor of Business Administration Harvard University
"Marty Fridson's new book is a refreshing and different approach to financial analysis. Marty goes beyond the usual exposition of ratio analysis to the much more interesting area of what the numbers really tell us. He shows 'how to make the numbers talk.'" —William Smythe Executive Director, Securities Valuation Office National Association of Insurance Commissioners
"Goes beyond textbooks . . . an insightful, hands-on review of financial statements in a pragmatic context." —Rosemary C. Clarke Managing Director, Public Fixed Income Research CIGNA Investments, Inc.
"If you want to become a better analyst and investor in stocks and bonds, this book is a must. A lively, entertaining, up-to-date, and in-depth discussion of the ins and outs of financial statement analysis that will increase the reader's necessary skepticism in arriving at investment decisions." —Richard S. Wilson Executive Managing Director Fitch Investors Service
"This book is comprehensive, analytical and rigorous, yet very practical and applications-oriented. Financial Statement Analysis, Second Edition can either be read from cover to cover, or used as a reference tool. The book provides a wealth of information in an extremely well written and well organized manner." —Frank J. Jones, PhD Executive Vice President and Chief Investment Officer The Guardian Life Insurance of America
Review
In Financial Statement Analysis: A Practitioner?s Guide, Third Edition (New York: John Wiley & Sons, Inc., 2002), Martin Fridson and Fernando Alvarez detail a number of gimmicks that companies have employed, including:
- Booking deliveries of computer software to resellers as sales, despite undisclosed agreements permitting the return of unsold merchandise for refunds.
- Helping managers to achieve their annual sales targets by announcing a price increase, effective January 2, to induce customers to order before year-end, even though the hike puts the company out of line with the competition.
- Taking credit for volume-based rebates from suppliers before purchases of merchandise reach the level needed to qualify for the rebates.
Surprisingly, to many readers, the slipperiness depicted in Financial Statement Analysis is not limited to penny-stock companies or high-flying initial public offerings. A number of the book?s case studies involve widely respected Fortune 500 corporations. The authors quote an official of one such company who freely admits that when a division is in danger of missing its quarterly profit goal, management tries to make an acquisition in the waning days so that it can count the unit?s earnings for the entire period.
Fridson and Alvarez do not merely describe and deplore opaque financial reporting practices. They document a number of cases in which analysts successfully anticipated stock and bond price shocks, using financial ratios and publicly available information from outside the statements. The authors also provide practical advice on making financial projections. (Extra Credit, The Journal of Global High Yield Bond Research)
Financial Statement Analysis, by junk bond guru Martin Fridson, is my No. 1 pick for those at an intermediate level. Fridson does a great job of explaining the various forces at work in corporate financial statement preparation, and also has valuable insights into issues such as pro form a income statements and revenue recognition practices. - Street.com
Synopsis
Praise for Financial Statement Analysis
A Practitioners Guide
Third Edition
"This is an illuminating and insightful tour of financial statements, how they can be used to inform, how they can be used to mislead, and how they can be used to analyze the financial health of a company."
Professor Jay O. Light
Harvard Business School
"Financial Statement Analysis should be required reading for anyone who puts a dime to work in the securities markets or recommends that others do the same."
Jack L. Rivkin
Executive Vice President (retired)
Citigroup Investments
"Fridson and Alvarez provide a valuable practical guide for understanding, interpreting, and critically assessing financial reports put out by firms. Their discussion of profitsquality of earningsis particularly insightful given the recent spate of reporting problems encountered by firms. I highly recommend their book to anyone interested in getting behind the numbers as a means of predicting future profits and stock prices."
Paul Brown
ChairDepartment of Accounting
Leonard N. Stern School of Business, NYU
"Let this book assist in financial awareness and transparency and higher standards of reporting, and accountability to all stakeholders."
Patricia A. Small
Treasurer Emeritus, University of California
Partner, KCM Investment Advisors
"This book is a polished gem covering the analysis of financial statements. It is thorough, skeptical and extremely practical in its review."
Daniel J. Fuss
Vice Chairman
Loomis, Sayles & Company, LP
Synopsis
Financial Statement Analysis
The goal of financial statement analysis is to shed light on the true financial condition of a company so realistic valuations can be determined for investment, lending, or merger and acquisition purposes. This important process has become increasingly complex over the years as corporate financial statements have become more difficult to decipher. But with Financial Statement Analysis, Third Edition, youll learn how to handle the practical challenges that are part of this business.
In Financial Statement Analysis, Third Edition, leading investment authority Martin Fridson returns with NYU Professor Fernando Alvarez to provide the analytical framework you need to scrutinize financial statements, whether youre evaluating a companys stock price or determining valuations for a merger or acquisition. This fully revised and up-to-date Third Edition offers detailed, fresh information that will allow you to evaluate financial statements in todays volatile markets and uncertain economy.
This definitive guide to the analysis and use of financial statements arms investors, money managers, bankers, and financial analysts with:
- Information that will allow you to "read between the lines" of financial statements and help you get past the biased portrait of a companys performance as represented by its financial statements
- Guidelines on how to interpret balance sheets, income statements, and cash flow statements
- A solid understanding of the lifeblood of the capitalist systemprofitsand how earnings can be exaggerated or even fabricated
- Tips for maximizing the accuracy of forecasts and a structured approach to credit and equity evaluation
With expanded coverage that includes merger accounting, pension issues, integrity of audits, and the addition of valuable new case studies, Financial Statement Analysis, Third Edition teaches analysts and professional investors new techniques for understanding and interpreting financial statements that are designed to conceal more than reveal.
Filled with real-life examples and expert advice, this comprehensive guide will motivate you to undertake genuine, goal-oriented analysis instead of simply going through the motions of calculating standard financial statement analysis. Pick up Financial Statement Analysis, Third Edition and you will acquire all the insight and professional know-how you need to find the facts behind the fiction of most corporate financial statements.
Synopsis
Praise for Financial Statement Analysis
A Practitioner's Guide
Third Edition
"This is an illuminating and insightful tour of financial statements, how they can be used to inform, how they can be used to mislead, and how they can be used to analyze the financial health of a company."
-Professor Jay O. Light
Harvard Business School
"Financial Statement Analysis should be required reading for anyone who puts a dime to work in the securities markets or recommends that others do the same."
-Jack L. Rivkin
Executive Vice President (retired)
Citigroup Investments
"Fridson and Alvarez provide a valuable practical guide for understanding, interpreting, and critically assessing financial reports put out by firms. Their discussion of profits-'quality of earnings'-is particularly insightful given the recent spate of reporting problems encountered by firms. I highly recommend their book to anyone interested in getting behind the numbers as a means of predicting future profits and stock prices."
-Paul Brown
Chair-Department of Accounting
Leonard N. Stern School of Business, NYU
"Let this book assist in financial awareness and transparency and higher standards of reporting, and accountability to all stakeholders."
-Patricia A. Small
Treasurer Emeritus, University of California
Partner, KCM Investment Advisors
"This book is a polished gem covering the analysis of financial statements. It is thorough, skeptical and extremely practical in its review."
-Daniel J. Fuss
Vice Chairman
Loomis, Sayles &Company, LP
Synopsis
A compact guide to evaluating financial statements and uncovering the realities behind the numbers. This edition has been updated with new information and examples which reflect today's financial actualities.
Description
Includes bibliographical references (p. 283-285) and index,
About the Author
MARTIN S. FRIDSON is Managing Director in the Global Securities Research & Economics Group at Merrill Lynch & Co. He was dubbed the dean of the high-yield bond market in conjunction with being voted onto Institutional Investor's All-American Research Team. Previously, Fridson was a principal and manager of Credit Research at Morgan Stanley & Co. He is also a practitioner director of the Financial Management Association, past president of the Fixed Income Analysts Society, and a member of the editorial boards of CFA Digest, Financial Analysts Journal, and Financial Management. His book Investment Illusions was also published by Wiley.
Table of Contents
PART I. READING BETWEEN THE LINES.
Chapter 1. The Adversial Nature of Financial Reporting.
PART II. THE BASIC FINANCIAL STATEMENTS.
Chapter 2. The Balance Sheet.
Chapter 3. The Income Statement.
Chapter 4. The Statement of Cash Flow.
PART III. A CLOSER LOOK AT PROFITS.
Chapter 5. What is Profit?
Chapter 6. Revenue Recognition.
Chapter 7. Expense Recognition.
Chapter 8. Applications and Limitations of EBITDA.
Chapter 9. The Reliability of Disclosures and Audits.
Chapter 10. Mergers-and-Acquisitions Accounting.
Chapter 11. Profits in Pensions.
PART IV. FORECASTS AND SECURITY ANALYSIS.
Chapter 12. Forecasting Financial Statements.
Chapter 13. Credit Analysis.
Chapter 14. Equity Analysis.
Bibliography.
Glossary.
Notes.
Index.